MGM International Resorts Case Analysis Memo
To: James J. Murren
From:
Date: November 18, 2013
Subject: Issues of MGM International Resorts I am writing this letter in order to address the slow recovery of your company. It has come to my attention that your company, MGM International Resorts, is facing some major issues as the gaming and hospitality industry struggles to recover. In this letter I plan to address the industries problems, and the specific issues that your company is facing.
One of the major issues facing MGM International Resorts is that it is that the industry has a lot of overcapacity as demand has dropped from pre-recessionary levels when many big projects have been planned. This is evidenced by your company’s ambitious pre-recession project CityCenter, the largest private development project in United States history. CityCenter ended up opening to little fanfare.
The biggest sources of revenue in the industry were conventions. Due to the economic downturn in 2008, revenues from Conventions have decreased dramatically and have not fully recovered. Trade shows, associations and corporations traditionally paid a premium to meet in Las Vegas. Now with fewer organizations meet in Las Vegas, they can now negotiate lower prices. There are now increased leisure travelers going to Las Vegas to fill discounted rooms but does not help you increase revenue much as they do not like to spend money on your high end shopping and dining venues. Americans are also deciding more carefully spend their money preferring “staycations” in order to save money on increasing airfares and travel costs. This is mainly due to the decrease in discretionary spending of 43 percent from December 2007 to January 2011.
The road to recovery from the start of the economic recession for the industry is slower than predicted. Your company also faces strong competition from competitors such as Wynn Resorts and Las Vegas Sands who have managed to fare in the recession substantially better.
MGM Resorts
From:
Date: November 18, 2013
Subject: Issues of MGM International Resorts I am writing this letter in order to address the slow recovery of your company. It has come to my attention that your company, MGM International Resorts, is facing some major issues as the gaming and hospitality industry struggles to recover. In this letter I plan to address the industries problems, and the specific issues that your company is facing.
One of the major issues facing MGM International Resorts is that it is that the industry has a lot of overcapacity as demand has dropped from pre-recessionary levels when many big projects have been planned. This is evidenced by your company’s ambitious pre-recession project CityCenter, the largest private development project in United States history. CityCenter ended up opening to little fanfare.
The biggest sources of revenue in the industry were conventions. Due to the economic downturn in 2008, revenues from Conventions have decreased dramatically and have not fully recovered. Trade shows, associations and corporations traditionally paid a premium to meet in Las Vegas. Now with fewer organizations meet in Las Vegas, they can now negotiate lower prices. There are now increased leisure travelers going to Las Vegas to fill discounted rooms but does not help you increase revenue much as they do not like to spend money on your high end shopping and dining venues. Americans are also deciding more carefully spend their money preferring “staycations” in order to save money on increasing airfares and travel costs. This is mainly due to the decrease in discretionary spending of 43 percent from December 2007 to January 2011.
The road to recovery from the start of the economic recession for the industry is slower than predicted. Your company also faces strong competition from competitors such as Wynn Resorts and Las Vegas Sands who have managed to fare in the recession substantially better.
MGM Resorts